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The zones of discrimination for M-Score is as such:
An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.
During the past 13 years, the highest Beneish M-Score of Vonage Holdings Corp was 0.99. The lowest was -5.34. And the median was -3.01.
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.
The M-Score Variables:
The M-score of Vonage Holdings Corp for today is based on a combination of the following eight different indices:
|M||=||-4.84||+||0.92 * DSRI||+||0.528 * GMI||+||0.404 * AQI||+||0.892 * SGI||+||0.115 * DEPI|
|=||-4.84||+||0.92 * 0.9442||+||0.528 * 1.0379||+||0.404 * 1.0551||+||0.892 * 1.0395||+||0.115 * 0.9619|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9524||+||4.679 * -0.147||-||0.327 * 0.9905|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $20.8 Mil.|
Revenue was 226.824 + 230.124 + 223.36 + 221.858 = $902.2 Mil.
Gross Profit was 148.608 + 153.014 + 147.961 + 149.432 = $599.0 Mil.
Total Current Assets was $117.4 Mil.
Total Assets was $750.9 Mil.
Property, Plant and Equipment(Net PPE) was $51.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $64.9 Mil.
Selling, General & Admin. Expense(SGA) was $454.5 Mil.
Total Current Liabilities was $170.7 Mil.
Long-Term Debt was $184.0 Mil.
Net Income was 7.931 + 3.406 + 3.433 + 8.347 = $23.1 Mil.
Non Operating Income was 0.154 + -0.247 + -0.05 + 0.032 = $-0.1 Mil.
Cash Flow from Operations was 14.572 + 46.105 + 37.665 + 35.237 = $133.6 Mil.
|Accounts Receivable was $21.2 Mil.
Revenue was 219.73 + 214.533 + 214.71 + 218.878 = $867.9 Mil.
Gross Profit was 148.687 + 149.881 + 149.03 + 150.486 = $598.1 Mil.
Total Current Assets was $133.9 Mil.
Total Assets was $678.0 Mil.
Property, Plant and Equipment(Net PPE) was $46.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $53.2 Mil.
Selling, General & Admin. Expense(SGA) was $459.1 Mil.
Total Current Liabilities was $165.4 Mil.
Long-Term Debt was $157.9 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(20.846 / 902.166)||/||(21.239 / 867.851)|
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(598.084 / 867.851)||/||(599.015 / 902.166)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (117.436 + 51.881) / 750.933)||/||(1 - (133.943 + 46.35) / 677.955)|
4. SGI = Sales Growth Index
Ratio of sales in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
5. DEPI = Depreciation Index
Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
|DEPI||=||(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1))||/||(Depreciation_t / (Depreciaton_t + PPE_t))|
|=||(53.205 / (53.205 + 46.35))||/||(64.867 / (64.867 + 51.881))|
6. SGAI = Sales, General and Administrative expenses Index
The ratio of SGA expenses in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
|SGAI||=||(SGA_t / Sales_t)||/||(SGA_t-1 /Sales_t-1)|
|=||(454.522 / 902.166)||/||(459.073 / 867.851)|
7. LVGI = Leverage Index
The ratio of total debt to total assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase$sgai= in leverage
|LVGI||=||((LTD_t + CurrentLiabilities_t) / TotalAssets_t)||/||((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)|
|=||((184.014 + 170.676) / 750.933)||/||((157.912 + 165.384) / 677.955)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(23.117 - -0.111||-||133.579)||/||750.933|
An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.
Vonage Holdings Corp has a M-score of -3.13 suggests that the company will not be a manipulator.
Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations
Vonage Holdings Corp Annual Data
Vonage Holdings Corp Quarterly Data